26 FOREST VALUATION 



estry must have some reasonable calculation to show what he ex- 

 pects of the business. Tax commissions and legislatures will not 

 change their methods unless shown convincing facts as argument. 

 It is self-evident that the assumed interest rate and all calculations 

 based on this rate have nothing at all to do with the growth of the 

 timber and all these calculations can possibly do is to give a reason- 

 able measure of what actually takes place and compare forestry as 

 a business with other kinds of business. The question is is there 

 a reasonable and acceptable basis for interest rate to set in forestry? 



b. Interest rates paid and made. 



In the United States today the ordinary loan pays about 5%, 

 timberland owners and many industrials pay 6% and over, the far- 

 mer pays about 6 % in the east and north, larger per cents in the 

 south and west, so that it was reported in 1912 that the farmer of 

 the United States borrows about 6,000 million dollars at an average 

 rate of 8%. Large railroad companies, etc., pay four or five per 

 cent. Cities and states pay about four per cent on their bonds, the 

 United States Government can borrow at from two to two and a 

 half per cent, and the savings banks with their enormous deposits - 

 pay generally three per cent, while millions of dollars are deposited 

 in banks and draw no interest. 



In Germany mortgages pay about four or four and a half per 

 cent, bonds about 3.4% to 3.8%. 



Interest rates are higher in new and undeveloped countries, the 

 West pays higher than the East. 



In the fourteenth century the common rate in Germany was ten 

 per cent, it sank to five per cent by the sixteenth century. After 

 the Napoleonic wars it went up to eight per cent, then it sank to 

 three per cent by 1870, rose again to five and then declined to present 

 rates. 



2. The fact that a man pays six per cent on his mortgage is 

 no indication that the man makes six per cent in his business, what- 

 ever that may be. This seems self-evident, and yet it is the most 

 common fallacy in connection with this discussion to assume that 

 because a certain per cent is paid by the men of a certain industry 

 when in need of money this rate is also made or approximated by 

 the industry. 



a. Since agriculture in the broad sense really includes forest- 

 ry, it is fair to use farm business as a criterion and see what farm 

 business pays. The data for the following analysis are taken from 

 circular I32-A, 1913, of the United States Department of Agricul- 

 ture, and based on the Census of 1910. 



